Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wabash National Corp (WNC, Financial) surpassed its earnings per share outlook due to stronger margin performance.
- The company has streamlined its organization and optimized its customer portfolio, leading to higher margin and more resilient revenue opportunities.
- Wabash National Corp (WNC) is focusing on parts and services, which are more stable than transportation equipment and provide a critical stabilizing force within financial performance.
- The company has a significant backlog of $1.3 billion in orders, with $1 billion expected to be shipped in the next 12 months.
- Wabash National Corp (WNC) increased its share repurchases during the second quarter, taking advantage of a perceived compressed valuation.
Negative Points
- Quarterly revenue was at the lower end of the previous guidance range.
- The company reduced its full-year 2024 guidance to a midpoint of $2.1 billion in revenue and $1.55 in EPS.
- Customer capital expenditure plans have been revised downward for the balance of the year.
- The dry van segment is experiencing ongoing weakness due to the freight recession.
- Pricing for trailers is expected to be down in the second half of the year, impacting profitability.
Q & A Highlights
Q: Can you provide some thoughts on the back half of the year margins for the transportation solutions segment? Are there any unusual movements or large orders that will be unusually profitable during the rest of the year?
A: Mike Pettit, CFO: The second half will be normalized but lower due to reduced revenue guidance. There are no anomalies or one-offs expected, so margins will be lower than the first half.
Q: What is the outlook for trailer pricing in the back half of the year?
A: Mike Pettit, CFO: Pricing will be down sequentially in the second half but will still generate solid profitability. The decrease will be modest but noticeable.
Q: Could you comment on the timing and potential impact of the trailers-as-a-service program?
A: Brent Yeagy, CEO: We are excited about the positioning of the offering for when the market upturn comes. It could be a good entry point for shippers or carriers, providing an alternative to outright buys. We are ready for the upturn but are not providing specific guidance yet.
Q: Are there any unusual costs in the first half of the year, and what might be the normalized decremental margin?
A: Mike Pettit, CFO: We consider 20% a good incremental/decremental margin. The first half had some cost benefits and lower production output, making the decrementals slightly higher than 20%. We expect 20% to be a good range as we grow.
Q: What are your expectations for trailer deliveries for the year?
A: Brent Yeagy, CEO: We expect deliveries to be in the low 30,000 range for the year.
Q: Is the decrease in trailer ASP due to a different mix or lower prices?
A: Mike Pettit, CFO: There is some price decrease and mix variation, including different trailer types and customer orders. The indirect channel, typically higher ASP, has been muted this year, impacting overall ASP.
Q: How do you see the demand for trailers evolving into 2025?
A: Brent Yeagy, CEO: We expect increasing demand profiles across 2025. Conversations with customers are ongoing, but it's too early to quantify demand for the first half of 2025. We anticipate a general upward demand curve moving into the upswing of the cycle.
Q: Do you expect the worst of the market conditions to be in the second half of this year, with improvement in 2025?
A: Brent Yeagy, CEO: Yes, we expect the worst to be in the second half of 2024, with a general upward demand curve as we move into 2025.
Q: How do you view profit per trailer in the context of cost inflation and market normalization?
A: Brent Yeagy, CEO: We expect profit per trailer to level out at a higher base due to cost inflation and internal improvements. We are in a good position to continue climbing profitability over the market upswing.
Q: What impact does the breadth of your portfolio have on profitability?
A: Mike Pettit, CFO: The breadth of our portfolio, including truck bodies, provides a sustainable tailwind for profitability, higher than it was prior to 2022-2023.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
